"Corporate governance" may be defined, described or delineated in diverse ways, depending on the writer's purpose. Writers focused on a disciplinary interest or context (such as accounting, finance, law, or management) often adopt narrow definitions that appear purpose-specific. Writers concerned with regulatory policy in relation to corporate governance practices often use broader structural descriptions. A broad (meta) definition that encompasses many adopted definitions is "Corporate governance describes the processes, structures, and mechanisms that influence the control and direction of corporations."

1. •Industrial license
•MSME
•Corporate governance
•Companies Act 2013
•SEBI norms
•RPT: Suzuki Mehsana
Vodafone
•Transfer pricing
•Netherland BIPA
• GAAR, DTC, UNICTRAL
Nokia: Royalty tax,
Finland DTAA
Today’s topics
All PowerPoint Slides available
at Mrunal.org/ECONOMY

2. 1. Debt vs Equity?
2. IIB, IINSS-C
3. T-Bill vs G-sec
4. IPO issue mechanism
5. Par value vs premium
6. ADR-GDR
7. Bond yield vs bond price relation

3. Preferential shares
Bonus issue
Rights issue
ETF
Hedge fund
P-notes
Call option, Put option

4. Stag investor
SENSEX formula
PAN card vs Aadhar Card
Trading softwares
FSLRC recommendations

5. 1948 Shyama Prasad Mukerjee: 1st
industrial policy.
1956 policy revised- main focus on PSU
1991 LPG reforms, Narsimharao’s new
industrial policy.
Industrial Policy

6. 1. FDI relaxed
2. NRI can invest upto 100%
3. Software technology parks
4. Disinvestment of PSU, Miniratna-
Navratna
5. MRTP act (‘69)=> CCI act (2002)
industrial
policy
features
1991

7. Only 3 areas reserved for Public
sector:
1. Atomic Energy
2. Atomic Minerals
3. Rail Transport
industrial
policy
features
1991

8. 1. Only 5 sectors require industrial
licensing
2. Remaining just fillup Industrial
Entrepreneur’s Memorandum
(IEM) @DIPP
3. DIPP: Department of Industrial
policy and promotion
industrial
policy
features
1991

9. Industrial license is required for…
Tobacco &
Cigar
Defense, Electronic
Aerospace eqip. Hazardous
Chemicals

10. 1. Nitrocellulose: guncotton
2. Hydrocyanic acid: Prussaic acid
3. Phosgene: plastic, pesticides
4. Methyl Isocyanate (MIC): Sevin
Fertilizer, Bhopal tragedy
3/12/84
Hazardous
Chemicals
License

11. 1. Mfg share in GDP 15%
2. Increased to 25%
3. Create 100 million jobs
4. PPP, infrastructure
5. Skill Development: polytech.
6. VC for startup companies
7. Nat.investment & mfg zone
(NIMZ)
8. Reform labor laws
Manufacturin
g
Policy
NMP-2011
Ignore for
Non-UPSC

12. 1. Labor laws: concurrent list
2. 44 union, 150+ state laws
3. Inspector-bribe raj
4. Industrial dispute act ‘47
5. >100 workers, Government
permission before laying off
6. Super-contractors: no EPF, SS.
7. Apprentices used as regular
workers
Labor
reforms
WHY?

13. 1. Two bills in LS (2014, Aug)
2. Factories Bill
3. Apprentice Bill
Labor
reforms
Solution

14. 1. 2010: Narendra Jadhav
Committee
2. 2014: Amendment bill
Factories
Act
Laws

15. criteria 1948 2014
power
used
10
workers
20
power not
used
20
workers
40
Define Factory

16. 1. Women workers can do
nightshift
2. Safety provision and home
transport
3. Can work on moving / heavy
machinery
4. Exempt: PH+ mothers
Factories
Bill 2014
features

17. 1. 100 hours overtime per 3 months
2. Min. 90 days / year to get paid
leaves.
3. Capacity: horsepower=>
kilowatts
4. Can decide its own workweek.
Factories
Act
features

18. 1. Cool water irrespective of
#workers
2. Spitton, sitting facilities=>
compoundable offense.
3. Restroom, lunchroom >75
workers
4. Canteen: 200> workers
5. Self-certification
6. Union can also make rules.
(earlier only states)
Factories
Bill
Facilities

19. 1. Women equality
2. More safety and facilities
3. Owner no arrest for minor
issues.
Factories
Bill
overall

20. 1. 1961 outdated law
2. 2014 bill
3. Age: 14 non-hz, 18 hazardous
4. non-engineering graduates and
diplomas can enter
5. Common training by multiple
companies
6. Test by National Council for
Vocational Training (NCVT).
Apprentice
Act
laws
Ignore for
Non-UPSC

21. Industrial policy
Factories act
Apprentice act
Next: MSME; => corporate sector =>
companies Act

22. Cottage
Family members
No hired manpower
Capital investment
negligible
Handmade
products, no tools
used
Area <10k population
Investment<15k /
worker
Village industry

23. Organized (17%)
Factories Act, 1948
Plantation acts
Shops and Commercial
Establishments Acts of
State Governments,
Industrial Employment
Standing Orders Act,
1946 etc
Not covered under such
acts
Unorganized (83%)

24. Organized (17%)
SS, EPF, Maternity
benefit
Unorganized Workers
Social Security Act 2008
Social security boards
setup at national and
state levels.
2010: NPS-Swavalamban
scheme
Unorganized (83%)

25. Mfg. Sector (32%)
MICRO upto 25 lakhs
SMALL >25 lakhs
MED. >5 cr.
Upper limit 10
cr.
MSME Classification: investment

26. Mfg. Sector (32%) Service (68%)
MICRO upto 25 lakhs upto 10 lakhs
SMALL >25 lakhs >10
MED. >5 cr.
Upper limit 10
cr.
>2 cr.
upper limit 5
cr.
MSME Classification: investment

27. - Pickles & chutneys
- Bread
- two edible oils
(without solvent
extraction) -Mustard
oil, Ground nut oil
- Wooden furniture and
fixtures
- Exercise books and
registers
- Wax candles
- Laundry soap
- Safety matches
- Fire works
- Agarbatties
- Glass bangles
- Steel almirah
- Rolling shutters
- Steel chairs, tables,
furniture
- Padlocks
- utensils- stainless
steel, aluminum
Items
reserved
SSI

28. Non-MSME industry
Must get license + 50% export
Doesn’t apply to SEZ
Items
reserved
SSI

29. No excise duty: 1.5 cr turnover
No Service tax: <10 lakh /year
Capital subsidy: 15lakhs to
purchase
SEDF / SIDBI
Khadi board, Coir Board, Udhyami
mitra
More: Refer to Economy section
Taxation
MSME

30. Policy 2012: 3 years
All central Government units
20% of total purchase from MSME
Within that 4% from SC/ST
Public
Procurement
MSME
Ignore for
Non-UPSC

31. Corporate Governance
1. Definition
2.Companies Act 2013
3.SEBI norms 2014

32. Way of directing the company
To protect stakeholders’ interest
To comply with legal-regulatory req.
Not mere technical compliance
Moral-ethical compliance
Absence: fraud, mismanagement
Corporate governance: Meaning?

33. SEBI Norms:
• Sep 2012: Adi Godrej
• April 2014: Published
• Effective 1st Oct. 2014
Companies Act
•Original 1956
•Aug 2013 (470 section)
•…
•Feb 2014: rules
notified
Corporate governance in India

34. Companies Act
2013
One person
Private ltd.
2-200
Public Ltd.
7-unlimited
Listed
Vodafone India.
Unlisted
Nokia-
Microsoft
34
Types of companies
Total ~9 lakh companies
>90% private ltd.

35. Companies
Act
2013
One person
Min.Capital: 1L
Convert once capital
>50 or turnover >2cr.
Private ltd.
2-200
Min.Capital
1 lakh
Public Ltd.
7-unlimited
Min. Capital
5 lakh
35
Dec. 2014: Government wants to scrap min.capital
Counter: shell companies, money laundering

36. 36
Infosys

37. Companies
Act
2013
One person
Min.Capital: 1L
Convert once capital
>50 or turnover >2cr.
Private ltd.
2-200
Min.Capital
1 lakh
Public Ltd.
7-unlimited
Min. Capital
5 lakh
37

38. •Reliance
industries Ltd
(Holding)
•Delight protein
Ltd. (Subsidiary)
38
Holding Vs Subsidiary

39. GEB: Gujarat Urja Vikas Nigam Ltd. (GUVNL)
Gujarat State Electricity Corporation Limited
(subsidiary)
Ukai G'Nagar Dhuvaran
Holding vs Subsidiary Companies

40. 1. Indian Railways, Postal
Department
2. commercial activity such as
engineering, manufacturing etc.
3. directly controlled, just like any
other department
4. not under the companies act
5. Employees = Government
servant
6. Directly CAG + RTI 40
Dept.
undertaking
Org.

41. 1. LIC, Air India, IDBI, UTI
2. Act of Parliament / State
Legislature
3. Wholly financed by Government
4. All BoD
5. Employees not Government
servant
6. Directly by CAG (some
exception)
Public
Corporations

42. 1. ONGC, SAIL, Coal India ltd.
2. Registered under Companies Act
3. Government owns >50% shares
4. Majority BoD.
5. Employees Not public Govt.
6. CAG appointed pvt. Auditors
7. “Ratna” Click Me
Government
Companies
Org.

43. Industrial licenses
MSME
Types of Companies and PSUs
NEXT: Board of Directors

44. Companies Act
2013
One person
Private ltd.
2-200
Public Ltd.
7-unlimited
Listed
Vodafone India.
Unlisted
Nokia India
44
Types of companies

45. SHARE-HOLDERS
Board of Directors
Chairman
MD/CEO
Executives
Staff
IPO

46. BoD
Chairman
Executive Director/Full-time
Nominated (Bank/CG)
Independent Director
46

47. Companies Act
2013
One person 1
Private ltd.
2-200
2
Public Ltd.
7-unlimited
3
47
No. of Directors (Compulsory under Companies
Act)

48. Maximum: 15
Even more by AGM resolution
One person: maximum 20 companies.
One director Indian resident (182 days)
One director Woman
12 months absent = vacate.
Companies Act 2013: Directors

49. BoD
Chairman
Executive Director/Full-time
Nominated (Bank/CG)
Independent Director
49

50. Not a Promoter
Pecuniary interest…X (except salary)
Employee…X
Companies Act 2013: Independent director

51. Companies
Act
2013
One person NA
Private ltd.
2-200
NA
Public Ltd.
7-unlimited
1/3rd
Minimum 3=>1
Max 15=>5
51
Independent Directors
Term: 5 years x 2 (performance review AGM)
Re-appointment: cooling 3 years

52. ID: Separate meetings
One person max. 7 companies ID
Full-time director in 1 company => 3
companies' ID
Term: 2 x 5 years (Retrospective)
Performance report on ID
Atleast 1 woman director in the board
SEBI norms: ID

53. SHARE-HOLDERS
Board of Directors
Chairman-MD
CEO
Executives
Staff
IPO
Independ Directors
Board Meetings

54. Minimum 4 meetings per year
Not > 120 days gap
Video conferencing…yes
Quorum: 1/3rd strength OR 2 directors
whichever max. (one person company..X)
7 days prior notice
Companies Act 2013 : Board meetings

55. 1. Audit committee
2. Stakeholder relationship committee (SRC)
3. CSR committee (CSRC)
4. Nomination and Remuneration committee
(NRC):
1. MD/Director: 11% of profit
2. CEO vs Median salary
3. Pay rise vs Company performance
Companies Act -BoD: Committee

56. Last 3 years' avg. profit=> 2% CSR spend
Applies to?
1. net profit of 50 million (Excluding Tax)
2. net worth of 5 billion (Asset-liability)
3. turnover of 10 billion (sales excluding
costs)
Foreign branch…X
Corporate Social responsibility (CSR)

57. SHARE-HOLDERS
Board of Directors
Chairman-MD
CEO
Executives
Staff
IPO
Independ Directors
Board Meetings
AGM

58. One person company: no need
Public & pvt LTD. companies…yes
General notice by letter / email
Quorum (physically present): depending on
# shareholders: 5 to 30
Proxy voting….Yes
Electronic Voting…Yes (SEBI C.G. Norms
also)
Annual General Meeting (AGM)

59. Auditing related
1. Independent directors
2.Board meetings
3.AGM

60. BoD => Audit Committee (ID)
External Auditors
Fraud report to Central government +
shareholders' meeting
One auditor=> maximum of 20 companies
Companies Act 2013

61. Individual auditor: 5 years
Audit firm: 5 year x 2
Cooling off: 5 years
Internal audit: CA/Accountant/others
Whistleblower mechanism
Full time Company Secretary: capital >Rs.5
cr
Companies Act 2013: Auditor’s term

62. Company cannot give loan to director /
related persons
Min. loan interest rate >G-Sec
Credit rating before accepting public
deposit (CIS)
Chief Finance Officer=> audit account
Companies Act 2013: misc.

63. Types of companies
Independent director, BoD, AGM
Audit related
Misc. loan, CIS

64. New bodies
Companies Act 2013
1. National Company Law Tribunal (NCLT)
2.National Financial Reporting Authority
(NFRA)
3.Investor and Education Protection Fund
4.SFIO Fraud

65. Judicial + technical members
Finish case in three months
Appeal: NCLAT
Present case by Self, Lawyer, CA, CS
Cases:
1. arbitration, compromise, M&A
2. Converting Public ltd. To private ltd.
3. Filing Class action suits (Satyam)
National Company Law Tribunal (NCLT)

66. 1 Chairman + 15 members
Accounting standards
Powers of civil court
Professional misconduct of
CA/accountant=> debar
Appeal: NFRAA
ICAI unhappy (Chartered Accountants Act,
1949)
#2: National Financial Reporting Authority (NFRA)

67. New bodies
Companies Act 2013
1. National Company Law Tribunal (NCLT)
2.National Financial Reporting Authority
(NFRA)
3.Investor and Education Protection Fund
4.SFIO Fraud

68. Since 1956’s company act
Unclaimed Dividend, interest, principle
Under Corporate Affairs Ministry
Awareness, seminar, financial literacy
Participation from RBI, SEBI, experts
Investor and Education Protection Fund

69. 2013’s Act: Statutory authority
@Delhi HQ, Regional offices
Corp. Affairs Secretary = Chairman
Members:
RBI Executive directors
SEBI Executive directors
Legal experts etc.
Investor and Education Protection Fund Authority

70. New bodies
Companies Act 2013
1. National Company Law Tribunal (NCLT)
2.National Financial Reporting Authority
(NFRA)
3.Investor and Education Protection Fund
4.SFIO Fraud

71. Naresh Chandra report on Corp.
governance
2003: under Corp. Ministry
Cases
1. Satyam
2. Reebok fraud
3. Sesa Goa invoice
4. Saradha Chitfund
Serious Fraud Investigation Office (SFIO)

72. Statutory body
Not just document examination
Search seize arrest
CrPC power- investigator
Once SFIO gets case, other agencies can’t
proceed.
State police, CBI -cooperate, provide
documents, witnesses.
Companies Act 2013: SFIO

73. 3 companies: OPC, pvt, public
4 new bodies: tribunal, financial reporting,
edu. Fund, SFIO
Directors: ID, women
Meeting: Board, AGM
Audit: fixed term, whistleblower, report to
central Govt.
Companies Act: Memorize

74. business-friendly regulations
Better corporate governance
Protecting small investors
Self-regulation
Less government approval
Conclusion: Companies Act 2013

75. SEBI Norms
Minority
shareholders
Independent
Directors
E-Voting
RPT- Related party
transaction
Transparency
Salary
Committee
under ID
Audit Committee
Whistleblowers
Adi Godrej
1st October 2014

76. Maruti Suzuki
Gujarat plant Controversy

77. HARYANA

78. • 1 Manager dead
• 2 Japanese Executive
injured
• Rs. >3000 crore
MANESAR UNREST, 2012

79. Mehsana
Suzuki
Motors
Gujarat
Cost price
Profit margin

80. HDFC, Reliance Cap, ICICI,
SBI
Less profit for MS=>less
dividend
MS. Will become mere
distributor/ marketing
company.
Suzuki (56%)
Why controversy?

81. HDFC, Reliance Cap,
ICICI, SBI
Maruti-Suzuki has
surplus of Rs.7500 cr.
Why not upgrade
Haryana?
100% subsidiary in
Gujarat
15 years lease
If not renewed, it’ll be
merged with Maruti-
Suzuki.
(2017) 25-30k Cr.
Suzuki (56%)

82. HDFC, Reliance Cap, ICICI,
SBI
Why not upgrade
Haryana?
Profit re-invested in Gujarat
@Haryana 1.5 million cars /
PA
@Gujarat 2.5 million (2017)
No Risk for Maruti
Suzuki (56%)
Why controversy?

83. 1. Mehana ~1200 Acre.
2. 640 acres in Becharaji ; 550 acres
in Vithalapur
3. Investment of Rs. 25-30k Cr.
4. Full Capacity in 2017
5. 2.5 million cars /PA
6. Autohub- replacing Tamilnadu
+Haryana
7. Suzuki Motors Gujarat
ltd=>Ahmedabad (HQ)
8. EMPLOYMENT
Gujarat
positive
Points
Maruti

84. Companies Act 2013 =>1/4/2014.
“Related party Transaction” RPT
Require vote from majority of
minority shareholders.
Minority shareholders=> SEBI
complaint
Negative for
Suzuki
Mehsana